How NOT to keep clients

This is how a cunning B2B ISP locked a furious customer (us) into an annual contract and forced us to pay for a broadband connection a staggering 12,000% more than another supplier (BE).

In March 2009 we bought a year’s worth of SDSL from a company called Managed Communications. It seemed like a good idea at the time. However, as the year progressed we felt that the product provided was both substandard and overpriced and in December we decided to look for a new broadband supplier after the Christmas holiday. On January 7th we informed Managed Communications that we would like to end our relationship when the contract ran out, as we didn’t feel we were getting good value. The account manager quite rightly expressed his disappointment and asked if he could discuss with us other Managed Communications solutions that might suit our requirements better.

But then the legal department rejected our request directing our attention to two clauses in our contract: first that we missed our 3 month notice deadline by 15 days (never mind the Christmas break) and second that the contract automatically renewed for another year. Our pleas were ignored and now we are facing another year of bad service, with a £2,640 price tag. And yes, there is more. As we expressed our fury and stated that we would like to give our notice now to terminate the service in March 2011, Managed Communications took the £2,640 off our bank account as the termination payment (a whole year in advance). In utter disbelief we requested a refund and to pay our fees quarterly, as we did last year, but this time it was the FD who said we can’t have it.

Although legally we don’t stand a chance challenging any of the above, this whole experience made me think about the cost of forcefully keeping unhappy customers.

A few years back, locking an unhappy client into a contract against their will would provide some short term financial benefits but in the long run little harm would be done; at some point the contract would end and the client would disappear into oblivion. But these days with the proliferation of social media and personal networks an unhappy client locked into a contract could do damage that greatly outweighed any revenue generated.

If Managed Communications accepted our termination, it could cost them £2,640 in lost revenue. Could I cause more damage than that? All I need to do is deter two companies in 12 months from buying their services and the lost revenue will be at least double.

Imagine a restaurant offering poor service and bad food to the same customer every day for 365 days. Or keeping an unhappy and disengaged employee for a year against their will.